With a whispered "thank you, my lord," to the judge, the man who has spent the last seven years in prison for the murder in 1999 of BBC television presenter Jill Dando yesterday left the dock in court one of the Old Bailey, a free man.

Now as the police and prosecution service survey the wreckage of their investigation into one of Britain's most high-profile killings, "the local weirdo", as he has been described, will be seeking compensation for his time behind bars and trying to rebuild a life that has always had a fragile relationship with reality.

Barry George was found not guilty by a unanimous verdict announced by the jury foreman, following 13 hours of deliberation and an eight-week trial. His eyes filled with tears as he heard the verdict and there were cheers from his relatives in court. For Scotland Yard, the decision was a devastating blow in what had always been a perplexing case.

Throughout the retrial George, who suffers from a personality disorder, had been convinced he would be convicted again, according to Dr Susan Young, the clinical psychologist who sat beside him throughout the trial to explain what was happening. "He said he was overwhelmed by the verdict," she said.

George, dressed in a green shirt and blue jersey, sipped water as the jury of eight women and four men took their places in court after they had reached their decision. He stood up as the foreman said the two words his family had been waiting seven years to hear.

He was arrested in 2000, convicted at his first trial in 2001 and won the right to a retrial after his second appeal last year. After collecting his belongings, George left the court in a taxi and was at a secret address last night. Media organisations have made offers for his story but his lawyer, Jeremy Moore, said he would also seek compensation from the government.

"This is not a time to celebrate," he said outside the court. "Barry George, an innocent man, has spent eight years in prison for a crime he did not commit. Those eight years could have been better served by the police in searching for the real killer ... We wish the police the best of luck in finding the real perpetrator."

There are no other suspects in the case and the chances of anyone else standing trial for the murder look slim.

Michelle Diskin, George's sister, who has played a key part in keeping the case alive, said she was "elated" and "thrilled". "This has been a seven-year uphill struggle," she said. "We are really delighted to finally have justice." She also expressed sympathy for Dando's family. Nigel Dando, the presenter's brother, had no comment on the verdict on behalf of the family.

But Scotland Yard and the Crown Prosecution Service (CPS) were bullish last night in defence of the investigation.

Commander Simon Foy, head of the Yard's homicide and serious crime command, said the investigation had been painstaking. "We are disappointed by today's verdict but especially disappointed for Jill's family and friends," he said. "However, we respect the decision of the court. The investigation ... was complex, thorough and professional with more than 2,500 statements taken and 3,700 exhibits recovered."

As to whether the inquiry would be reopened, Foy said: "It would not be appropriate to comment any further at this time, except to say that we will be reflecting on today's verdict and considering how best to proceed."

The CPS also defended its actions. "Mr George now has the right to be regarded as an innocent man, but that does not mean it was wrong to bring the case," said Hilary Bradfield the CPS' reviewing lawyer. "Our test is always whether there is sufficient evidence for a realistic prospect of conviction - it would be wholly wrong to only bring cases where we were guaranteed a conviction."